Many Member States have thincap legislation limiting the deductibility of interest payments and possibly reclassifying (remuneration on) debt instruments. This article argues that if this legislation results in the non-deductibility of interest only, both the EU Interest and Royalties Directive and the Parent-Subsidiary Directive are not applicable. The latter is, however, applicable where thincap legislation reclassifies (remuneration on) debt instruments as equity (dividends). As a result, a gap exists between the application of the EU directives and thincap legislation.